Question & Answer

Latoya filed her tax return on February 10th this year.  When will the statute of limitations expire for this tax return?

Using the facts from the previous problem, how would your answer change if Latoya understated her income by 40 percent? How would your answer change if Latoya intentionally failed to report as taxable income any cash payments she received from her clients?

Paula could not reach an agreement with the IRS at her appeals conference and has just received a 90-day letter.  If she wants to litigate the issue but does not have sufficient cash to pay the proposed deficiency, what is her best court choice?

In choosing a trial-level court, how should a court’s previous rulings influence the choice?  How should circuit court rulings influence the taxpayer’s choice of a trial-level court?

Sophia recently won a tax case litigated in the 7th Circuit.  She recently heard that the Supreme Court denied the writ of certiorari.  Should she be happy or not, and why?

Discuss the importance of job satisfaction and trust for effective employee performance.

Yong’s tax return was audited because he calculated his tax liability incorrectly.  What IRS audit procedure identified his tax return for audit?

Randy deducted a high level of itemized deductions two years ago relative to his income level.  He recently received an IRS notice requesting documentation for his itemized deductions.  What audit procedure likely identified his tax return for audit?

The IRS recently completed an audit of Shea’s tax return and assessed $15,000 additional tax.  Shea requested an appeals conference but was unable to settle the case at the conference.  She is contemplating which trial court to choose to hear her case.  Provide her a recommendation based on the following alternative facts.

Marjorie sold her condominium for $500,000 on September 14, 2014; she had paid $330,000 for it in 2006. Marjorie collected the selling price as follows: 2014, $80,000; 2015, $320,000; and 2016, $100,000. Marjorie appropriately uses the installment-sales method. Prepare a schedule to determine the gross profit for 2014, 2015, and 2016 from the installment sale.

Juanita, a Texas resident (5th Circuit), is researching a tax question and finds a 5th Circuit case ruling that is favorable and a 9th Circuit case that is unfavorable.  Which circuit case has more “authoritative weight” and why?  How would your answer change if Juanita were a Kentucky resident (6th Circuit)?

Faith, a resident of Florida (11th Circuit) recently found a circuit court case that is favorable to her research question.  Which two circuits would she prefer to have issued the opinion?

Robert has found a “favorable” authority directly on point for his tax question.  If the authority is a court case, which court would he prefer to have issued the opinion?  Which court would he least prefer to have issued the opinion?

Jamareo has found a “favorable” authority directly on point for his tax question.  If the authority is an administrative authority, which specific type of authority would he prefer to answer his question?  Which administrative authority would he least prefer to answer his question?

For each of the following citations, identify the type of authority (statutory, administrative, or judicial) and explain the citation.

Justine would like to clarify her understanding of a code section recently enacted by Congress.  What tax law sources are available to assist Justine?

Maurice has a client that recently asked him about the odds of the IRS detecting cash transactions not reported on a tax return.  What are some of the issues that Maurice should discuss with his client?

Aldina has identified conflicting authorities that address her research question.  How should she evaluate these authorities to make a conclusion?

Georgette has identified a 1983 court case that appears to answer her research question.  What must she do to determine if the case still represents “current” law?

Sandy has determined that her research question depends upon the interpretation of the phrase “not compensated by insurance.”  What type of research question is this?

Harriet and Harry Combs (both 37 years old) are married and both want to contribute to a Roth IRA. In the current year, their AGI before any IRA contribution deductions is $50,000. Harriet earned $46,000 and Harry earned $4,000. a. How much can Harriet contribute to her Roth IRA if they file a joint return? b. How much can Harriet contribute if she files a separate return? c. How much can Harry contribute to his Roth IRA if they file separately?

Pierre recently received a tax penalty for failing to file a tax return.  He was upset to receive the penalty, but he was comforted by the thought that he will get a tax deduction for paying the penalty.  a.  Use an available tax research service to determine if Pierre is correct. b.  Write a memo communicating the results of your research.

Paris was happy to provide a contribution to her friend Nicole’s campaign for mayor, especially after she learned that charitable contributions are tax deductible.  a.  Use an available tax service to determine whether Paris can deduct this contribution. b.  Write a memo communicating the results of your research.

Felicia Rashad Corporation has pretax financial income (or loss) equal to taxable income (or loss) from 2006 through 2014 as follows. Income (Loss) Tax Rate 2006 $ 29,000 30% 2007 40,000 30% 2008 17,000 35% 2009 48,000 50% 2010 (150,000) 40% 2011 90,000 40% 2012 30,000 40% 2013 105,000 40% 2014 (60,000) 45% Pretax financial income (loss) and taxable income (loss) were the same for all years since Rashad has been in business. Assume the carryback provision is employed for net operating losses. In recording the benefits of a loss carryforward, assume that it is more likely than not that the related benefits will be realized. Instructions (a) What entry(ies) for income taxes should be recorded for 2010? (b) Indicate what the income tax expense portion of the income statement for 2010 should look like. Assume all income (loss) relates to continuing operations. (c) What entry for income taxes should be recorded in 2011? (d) How should the income tax expense section of the income statement for 2011 appear? (e) What entry for income taxes should be recorded in 2014? (f) How should the income tax expense section of the income statement for 2014 appear?

Randy has found conflicting authorities that address a research question for one of his clients.  The majority of the authorities provide an unfavorable answer for his client.  Randy estimates that if the client takes the more favorable position on its tax return that there is approximately a 48 percent chance that the position will be sustained upon audit or judicial proceeding.  If the client takes this position on its tax return, will Randy be subject to penalty?  Will the client potentially be subject to penalty?